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A Foolish Take: The Future Looks Murky for Department Store Chains

By Leo Sun – May 29, 2017 at 12:00PM

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E-commerce and changing shopping trends are sinking these aging retailers.

The past few years have been rough for department stores, which once enjoyed a steady flow of foot traffic as the anchors of sprawling malls. The rise of online shopping caused mall traffic to plummet, while "fast fashion" retailers like H&M lured away apparel shoppers.

Department store chains like J.C. Penney (JCPN.Q), Sears (SHLDQ), Macy's (M 2.71%), Nordstrom (JWN 6.28%), and Dillard's (DDS 4.12%) reacted to that shift with store closings, discounts, and e-commerce investments. But based on their comparable-store sales growth in fiscal 2016, those efforts haven't stopped the bleeding.

Chart comparing the comparable-store sales at five major department store chains

Data sources: Annual reports. Chart by author.

Each of these companies has offered turnaround plans. J.C. Penney is selling more home improvement items, beauty products, and athletic apparel. Sears plans to cut over a billion dollars in expenses to stay afloat. Macy's is experimenting with stores within stores, private-label products, and more discounts. Nordstrom is expanding its off-price brands, and Dillard's is relying on its relative strength in women's apparel.

Those plans haven't impressed investors. That's why all five stocks have posted double-digit declines over the past five years. Unless these companies dramatically pivot their businesses away from big brick-and-mortar stores and malls, that pain could continue for the foreseeable future.

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Leo Sun has no position in any stocks mentioned. The Motley Fool recommends Nordstrom. The Motley Fool has a disclosure policy.

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